Cap Mar

• Stockbroker


  Financial agent that will help you make your invested money grow
• Types of stockbrokers


  • Traditional
  • Online
• Traditional brokers


  Assign a licensed salesman to handle your account and take your orders via written instruction or through a phone call
• Online brokers


  Main interface with their customer is through the Internet
• Opening a trading account

  1. Fill out a Customer Account Information Form

  2. Provide two valid IDs

  3. Provide specimen signature cards

  4. Provide proof of billing
• Placing an order to buy or sell stocks

  1. Make a telephone call to your stockbroker

  2. Send an SMS to your stockbroker

  3. Place order directly online via the Internet
• Confirmation receipt


  Details of your transaction
• Settlement of transactions


  1. For traditional stockbrokers, usually done after three working days from the transaction (T+3)

  2. For online stockbrokers, done on the transaction date
• When posting an order, you must tell your stockbroker the name of the listed company or the symbol of the stock to be bought or sold, the price you are willing to buy or sell a specific stock and the number of shares to be traded
• The most common order types based on price are market (prevailing market price) and limit (specified price) orders
• Traders have access to many different types of orders classified according to validity such as Day, Good Till Cancelled (GTC), Good Till Date (GTD) and Good Till Week (GTW)
• Foreign exchange market


  Trading of currency and bank deposits denominated in particular currencies
• From end of World War II until early 70's, we are on a fixed exchange rate system administered by International Monetary Fund
• Devaluation


  The currency was made cheaper with respect to the dollar
• Upvaluation/revaluation


  The currency became more expensive with respect to the dollar
• A floating rate international currency system has been operating since 1973
• Factors influencing exchange rate determination

  • The country's economic strengths
  • Its level of exports and imports
  • The level of monetary activity
  • The deficits in its balance of payments
• Short-term, day-to-day fluctuations in exchange rate are caused by supply and demand conditions in the foreign exchange market
• Foreign exchange market


  Provides a service to individuals, businesses, and governments who need to buy or sell currencies other than that used in their country
• Currency trading entails no specific physical location; instead, it is an over the counter market
• Since the foreign exchange market provides transactions in a continuous manner for a very large volume of sales and purchase, the currencies are efficiently priced; or the market is efficient
• Exchange rate


  The price of one country's currency expressed in terms of another country's currency
• When a country's currency appreciates

  The country's goods abroad become more expensive and foreign goods in that country become cheaper
• When a country's currency depreciates


  The country's goods abroad become cheaper and foreign goods in that country become more expensive
• The present international monetary system consists of a mixture of "freely" floating exchange rates and fixed rates
• Factors that affect exchange rate movements

  • Inflation
  • Interest rates
  • Balance of payments
  • Government's policies or intervention
• Inflation


  Tends to deflate the value of a currency because holding the currency results in reduced purchasing power
• Interest rates


  If interest returns in a particular country are higher relative to other countries, individuals, and companies will be enticed to invest in that country, increasing demand for the country's currency
• Balance of payments


  Refer to a system of accounts that catalogs the flow of goods between the residents of two countries
• Government intervention


  The central bank of a country may support or depress the value of its currency by buying or selling the currency in the foreign exchange markets
• An exchange rate set too high (in foreign currency units per peso) tends to create a deficit in the Philippine balance of payments
• An exchange rate set too low (in foreign currency units per peso) tends to create a surplus in the Philippine balance of payments
• Devaluation


  A major reason is to improve a country's balance of payments
• Managed float


  The current method of exchange rate determination
• Purchasing Power Parity (PPP)


  A theory of how exchange rates are determined, based on the assumption that exchange rates are determined solely by changes in relative price levels between countries
• The PPP theory does not take into account that many goods and services (whose prices are included in a measure of a country's price level) are not traded across borders
• Types of foreign exchange rate transactions

  • Spot transactions
  • Forward transactions
• Spot transactions


  Involve immediate (two-day) exchange of bank deposits
• Forward transactions


  Involve exchange of bank deposits at some specified future date
• Direct quote


  Indicates the number of units of the home currency required to buy one unit of the foreign currency